Good morning, and thank you for attending EcoPro BM's earnings call despite your busy schedules. On the call, we have Mr. Kim Jang-woo, CEO of EcoPro BM, Mr. Bang Han-min, EVP Strategic Planning, Mr. Kim Chang-guk, EVP of Sales, Mr. Choi Jun-young, EVP of Sales, Mr. Shin Ho-sang, Managing Director of Purchasing, and Mr. Gong Bo-hyun, Managing Director of Development. Please note that the results are subject to changes following audit by outside auditors.
Now without further ado, let's begin the Q1 2026 EcoPro BM's earnings call.
Good morning. I'm Jin-w oo Ju, Head of the IR team at EcoPro BM. Please refer to the earnings presentation materials that have been distributed in advance. Today's conference call will proceed as follows. We will first provide an overview of the company's performance, followed by a Q&A session with the management team. First, I will discuss EcoPro BM's consolidated financial performance on page four. In the first quarter of 2026, our consolidated revenue reached KRW 605.4 billion, up 22% QoQ. Operating profit recorded KRW 20.9 billion, down by 50% from the previous quarter. Looking at revenue, we saw a 22% QoQ increase driven by improving EV sales in Europe and steady demand growth in the non-EV sector during the Q1 sector.
For reference, the Q1 average selling price rose by 2% impacted by higher metal prices and higher exchange rates. Regarding operating profit, we recorded KRW 20.9 billion. This result was achieved through increased sales volume and higher ASP in the first quarter, despite the higher base effect from a KRW 31.8 billion one-time gain in the fourth quarter of last year, which resulted from changes in the useful lives of tangible assets. Moving on to page five, I will provide a breakdown of our revenue structure. First, by looking at revenue by product category in terms of value, EV-related revenue increased by 24% QoQ, driven by a recovery in shipment volumes to Europe during the first quarter.
Revenue from power applications grew by 20% in Q1 following increased shipments fueled by AI-related construction expansion and replacement demand for products such as e-bikes. ESS-related revenue also saw a 4% increase, supported by rising demand for data centers and renewable energy. Moving to page six, I will discuss our financial position. Looking at the balance sheet on the left, as of the end of Q1 of 2026, total assets have reached KRW 5.1854 trillion, up 6.2% QoQ. Total liabilities increased by 8.2% to KRW 3.1005 trillion, and total equity rose by 3.4% to KRW 2.0849 trillion.
Inventory assets increased by 12% as of the end of Q1, driven by sales delays to North American customers and inventory stockpiling in preparation for mass production at our Hungary plant. Our current ratio slightly decreased from 72% in the previous quarter to 71%. The net ratio rose from 96% to 106%, due to investment payments for the Hungary plant and an increase in working capital.
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Moving to page seven. I will outline our business environment and strategic direction. First, we will strengthen our competitiveness in Europe, a key strategic region, by leveraging our Hungary plant, which is scheduled to commence mass production in the first quarter of this year. Specifically, we aim to establish a system for a timely response to customer needs by stabilizing Hungary's mass production early on. At the same time, we will pursue new customer acquisition within the European market and diversify our product portfolio to include both NCA and NCM lineups. Furthermore, as regional demand for cathode material is rising due to the impact of European regulatory policies such as TCA and IAA, we plan to review capacity expansion in anticipation of additional orders from new customers.
Lastly, we will explore additional revenue streams and enhance our cost competitiveness through new investments in our existing vehicle smelting operations in Indonesia. This concludes the presentation of EcoPro BM's Q1 earnings results. Thank you.
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This completes the earnings presentation. We will move on to the Q&A.
[Non-English content] Now Q&A session will begin. Please press star three, that is star and three, if you have any questions. Questions will be taken according to the order you have pressed the number star three. For translation, please press star four, that is star and four, on your phone. [Non-English content] The first question will be provided by Choi Tae-yong from DS Investment & Securities. Please go ahead with your question.
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Thank you very much. I am Choi Tae-y ong from DS Securities, and thank you for giving me the opportunity to ask you questions. Today, I have two questions. First has to do with second quarter performance outlook and revisions to annual guidance, if there is any. The second question has to do with the operational schedule for the Hungary plant and expected profitability for this year.
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Thank you. I am Kim Jang-woo, CEO of EcoPro BM. I will take your first question on the second quarter performance outlook and potential revisions to annual guidance. As noted in the earlier results presentation, our Q1 revenue increased by approximately 20%, QoQ , driven by increased shipments to major customers and the effects of new vehicle launches. According to the battery market forecast, the European EV market is projected to grow by around 20%, YoY in 2026. This growth trend is expected to persist beyond 2027.
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Regarding the Q2 outlook, while risks regarding the slowdown in the North American market still remain, we anticipate a clear growth trend in the European EV market. Considering the ramp up effect from our Hungary plant, we expect a solid growth to continue through the second quarter and beyond. All in all, our existing annual guidance still remains the same. In terms of profitability, we expect to consistently increase our quarterly operating profits by leveraging fixed cost absorption through increased volumes and achieving cost reductions through enhanced production line efficiency. Thank you.
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I am Bang Han-min, the EVP of Strategic Planning, and I will provide an update on the operational timeline and earnings outlook for our Hungary plant. The Hungary plant is scheduled to commence operations in sequence. One production line in May 2026, followed by a second line in September. We estimate 2026 production volume at approximately 10,000 tons, with expectations to scale up to 30,000 tons in 2027, which is three times. From a mid to long term perspective, as was mentioned earlier, we anticipate a consistent increase in volumes from our Hungary subsidiary as the necessity for local sourcing in Europe grows due to regulatory frameworks such as the TCA and IAA.
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In terms of profitability, in first year operations, the Hungarian subsidiary will see limited production volumes while facing fixed cost burdens such as depreciation and labor costs. In the second half of this year, we plan to pursue a turnaround to profitability by establishing early on a stabilized mass production system, improving line operational efficiency, as well as implementing additional cost reductions.
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We'll take our next question.
[Non-English content] . The following question will be presented by Lee Chang-min from KB Securities. Please go ahead with your question.
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Thank you very much for the opportunity to ask questions. I also have two questions. The first one has to do with the impact of the recent change in administration in Hungary. What sort of impact do you expect from this government change? The second question has to do with the new orders. Please update us with the status of new orders in Europe and other regions, including CATL.
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Thank you very much. I am Kim Jang-woo, the CEO of the company, and I will address the potential impact of the change of administration in Hungary. As was reported in the media, the general elections held on April 12th have resulted in a transition of government from the ruling party, which had actively attracted investments to foster the battery industry to the opposition. As a result, we anticipate a further tightening of environmental standards and labor regulations. Now, that said, I believe that when it comes to automobiles and automobile battery and materials sector, I think that they are very important for Hungarian manufacturing industry as well since they can help enhance economic growth and also employment.
That said, I believe that although the new government will work on the tightened environmental regulations and labor regulations, the business prospects, profitability and business performance will also be very important for the new government.
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Now, I would like to also note that, we are still in a transitional phase, following the change in government. We will closely monitor the new administration's policy direction, and we are committed to ensuring seamless, plant operations by strictly complying with local laws and regulations.
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I am Choi Jun-young , EVP of Sales, and I will provide an update on our progress regarding new orders. Starting with the EV segment, we are focused on securing new contracts under our strategy of diversifying both products and customers. In our core high nickel product lineup, we have recently achieved success in securing new orders for the European and North American markets. Besides high nickel, we are currently undergoing product evaluations and discussions with domestic and international battery manufacturers as well as global OEMs to secure orders for our high voltage mid nickel products. We expect to see some tangible results within this year.
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Also, as was mentioned before, leveraging our Hungary plant, which is scheduled to commence operations in the first half of the year. We are in talks with major customers regarding high nickel projects for the steadily growing European EV markets. Of them, for two or three projects, we're currently engaged in detailed discussions regarding supply schedules and other specifics, and we look forward to sharing with you some positive results. Beyond the EV market, we are actively pursuing new ESS contracts and expanding volumes across various power applications, including power tools, micro mobility and robotics to bolster our growth momentum.
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We will take next question.
[Non-English content] . The following question will be presented by Choi Bo-young from Kyobo Securities. Please go ahead with your question.
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Thank you. This is Choi Bo-young from Kyobo Securities. I would like to also thank the management for the opportunity to ask questions. Earlier, there was a comment about EcoPro BM's strategy to diversify customers and also products. I have two questions that is relevant to product diversifications. First of all, I would like to know the status of solid-state battery and LMR material development as a company. Second of all, any changes to the investment decision regarding the LFP cathode business.
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Thank you. I am Gong Bo-hyun, VP of R&D, and I will update you on the development status of our solid-state battery and LMR materials. First, regarding solid-state battery materials, the core component is the solid electrolyte. We began developing sulfide-based solid electrolytes four years ago and have secured proprietary process technology. We're currently operating a pilot plant with an annual capacity of 40 tons, and our products have already completed quality validations with major battery manufacturers. We are currently reviewing pilot production with leading customers, with the earliest mass production expected in 2027. The design for the mass production line is complete, and we plan to commence construction in alignment with customer demand.
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We are also developing cathode materials specifically for solid-state batteries. We are one of the few material providers globally capable of developing and producing both solid electrolytes and cathode materials. Building on our expertise in NCM high nickel cathodes, we're developing specialized cathode materials optimized for sulfide-based solid electrolytes to lead the market.
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Next, I will discuss the development status of our LMR cathode materials. Our LMR cathodes are undergoing continuous cell-level validation with major customers, and we have now entered the stage of securing material stability and reproducibility through iterative testing. As a result, we're moving beyond simple development management to establish a more concrete quality control system predicated on mass production.
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Furthermore, as market interest in LMR materials expands, we're seeing an increase in evaluation requests from our customers in not just North America, but from many global OEMs. To address this, we're currently developing a diversified range of new products optimized for specific customer performance requirements. On the manufacturing side, we are optimizing process conditions to utilize existing NCM production lines to continue to make preliminary preparations to ensure a seamless transition to mass production within a short timeframe once customer orders are finalized.
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I am Bang Han-min, EVP of Strategic Planning, and I will address your second question regarding our LFP business. While we haven't recurring until recently, the LFP investments are to meet the rapidly growing demand in the North American ESS market. We are currently revisiting these plans. This decision is based on several factors, including policy-related variables in the North American ESS market, for example, the PSC and MACR regulations, as part of the OBBBA tax, as well as high prices and also increasing lithium prices. Nevertheless, our preparations to supply multiple customers through our existing 4,000 ton fourth generation product lines are proceeding without disruption.
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As we gain further clarity on policies and continue to monitor market conditions, we will actively communicate with the market should any changes occur in our future investment plans.
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We will take next question.
[Non-English content] . The following question will be presented by Hyun-soo Kim from Hana Securities. Please go ahead with your question.
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Thank you. This is Kim Hyun-s oo from Hana Securities. I have two questions. First has to do with policies, as was mentioned earlier. As was mentioned, early March this year, the IAA Act or the bill for IAA was proposed in Europe. If you look at the details of the act, the proposed act, it requires local sourcing for battery and cathode materials. My question is, do you see any changes in local supply discussions since the proposal of the EU Industrial Accelerator Act? My second question has to do with the Hungarian plant that you plan to commence operations in the second half of this year.
You mentioned that they will come online in phases of the first and second line. We believe that in according to that schedule, in two years time, there will be a shortage in production capacity. I'd like to ask whether you have a plan to expand your production lines in Hungary and what your investment and also financial plans are.
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I am Ho-sang Shin , the EVP procurement , and I will address the impact following the proposal of the European IAA Bill. As was mentioned, this past March, the European Union announced the draft of the Industrial Accelerator Act, and this legislative proposal serves as an industrial protection measure designed to rebuild manufacturing competitiveness within the European Union and reduce dependency on foreign sources, particularly China. Regarding the battery sector, the bill aims to mandate the use of regionally sourced key components, including cells, BMS, and cathode materials.
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The proposed IAA, alongside with the CRMA that was introduced in advance. We believe that they serve as a mid to long term catalyst for promoting the use of regionally sourced cathode active materials in Europe. Currently, we are in discussions with our customers to respond to those. We see a significant increase in procurement interest for cathode active materials supplied through our Hungary and our subsidiary, and we are continuously monitoring the specific regulatory implications as the legislation evolves and will maintain active communication with the market through our IR team. I am Kim Jang-woo, the CEO of the company. I will take the second part of your question with regard to additional investment plans in Europe and capital management strategy for existing debt.
We have successfully completed our 54,000 ton capacity plant in Hungary and are preparing for mass production in order to cover the demands in Europe, as was mentioned earlier. To meet the expanding global OEM volumes newly secured by our customers, we plan to implement additional production line expansions. However, we are reviewing these expansions in alignment with committed order volumes to ensure economic viability and high utilization rates. Regarding debt management, the put option for these convertible bonds issued in 2023 is set to expire this July. We are currently in discussions with our investors to reach a mutually beneficial solution, such as extending the maturities or refunding the issuance.
In addition, we plan to leverage our available liquidity of KRW 500 billion and execute early redemption of the perpetual bonds issued in 2024, worth about KRW 330 billion, beginning the second half of 2026. To support the aforementioned potential investments in Hungary and debt repayments, we are focused on maximizing internal cash flow generation while simultaneously exploring various new financing options, such as borrowings. We will continue to implement a flexible and stable capital management strategy by closely monitoring business environments and financial market trends. We will communicate further with the market once specific details are finalized. We will take next question.
The following question will be presented by Chang Jung-hoon from Samsung Securities. Please go ahead with your question.
Yes, thank you very much for the opportunity to ask you questions. My name is Chang Jung-hoon from Samsung Securities. I also have two questions for you. First of all, I understand that the high nickel cathode materials that you've been supplying to a particular customer now has a reduced capacity and also utilization rate at the moment. I would like to ask, if possible, if you can share the plans for utilizing the production lines for high nickel cathode materials. My second question has to do with the Hungary plant. You explained earlier how you plan to have them online in two phases.
For to supply to new customers, do you have to add additional production lines or can you use the existing lines? Thank you very much for your questions. I am Bang Han-min, the responsible for corporate strategy at EcoPro BM, and I will take your first question about the reduced capacity and utilization rate for high nickel cathode materials. I believe that this is an issue not just for EcoPro BM, but for all cathode material suppliers in Korea. For the capacity to increase, the market conditions in North America and Asia also has to improve. Without the market improvements, I believe that number-wise and numerically, it's really difficult to have an uptick.
Now, that said, we have our Hungary plant coming online pretty soon in Europe. In line with the shipments from our Hungarian plant, we also plan to ship a certain proportion of the cathode materials from our Pohang plant. We believe that that will have some tangible effect in 2026 and 2027 in terms of our capacity and utilization rates. On top of that, not just the existing customers and large customers that is, we will also target smaller potential customers and also startups by active sales so that we can bring up our utilization rates. I would like to also take your second question regarding the potential expansion of our Hungarian plant and increase our investments thereon.
As well as explained before, we can in line with new orders, review the further expansions of our Hungarian plant. I believe that not just the for the investment's sake, but it's going to be very important to guarantee a certain level of utilization rates and also economic viability. Currently our plant one in Hungary has three lines, and if we pursue plant number two, it's going to be probably on the same site. With regard to the number of lines, we'll have to see depending on the potential volumes that we end up attracting. It could be two or it can be three.
Now, with regard to plant number one, we have certain lessons learned with regard to regulations and also various issues. If we were to build a second plant in Hungary, we believe that we can do it in a much more efficient and speedy fashion.